Credit conditions indices: Controlling for regime shifts in the Norwegian credit market
AbstractThe interaction between financial markets and the macroeconomy can be strongly affected by changes in credit market regulations. In order to take account of these effects we control explicitly for regime shifts in a system of debt equations for Norway using a common, exible trend. The estimated shape of the trend matches the qualitative development in the regulations, and we argue that it can be viewed as a measure of relative credit availability, or credit conditions, for the period 1975-2008 - a credit conditions index (CCI). This entails years of strict credit market regulations in the 1970s, its gradual deregulation in the 1980s, followed by a full-blown banking crisis in the years around 1990 and the development thereafter up to the advent of the current nancial crisis. Our study is inspired by Fernandez-Corugedo and Muellbauer (2006), which introduced the methodology and provided estimates of a CCI for the UK. The trend conditions on a priori knowledge about changes in the Norwegian regulatory system, as documented in Krogh(2010b), and it shows robustness when estimated recursively.
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Bibliographic InfoPaper provided by Oslo University, Department of Economics in its series Memorandum with number 10/2011.
Length: 28 pages
Date of creation: 28 Apr 2011
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC
credit conditions; exible trend; financial deregulation; household loans;
Other versions of this item:
- Eilev S. Jansen & Tord S. H. Krogh, 2011. "Credit conditions indices: Controlling for regime shifts in the Norwegian credit market," Discussion Papers 646, Research Department of Statistics Norway.
- Jansen, Eilev S. & Krogh, Tord S. H., 2011. "Credit conditions indices: controlling for regime shifts in the Norwegian credit market," Economics Discussion Papers 2011-12, Kiel Institute for the World Economy.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-07 (All new papers)
- NEP-BAN-2011-05-07 (Banking)
- NEP-MAC-2011-05-07 (Macroeconomics)
- NEP-REG-2011-05-07 (Regulation)
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